Precision in Drafting LLC Operating Agreements and Information Rights

Rebecca A. Guzman | Duane Morris LLP

Rebecca A. Guzman is a partner at Duane Morris LLP and serves as global co-lead of the firm’s Private Equity industry group. Rebecca also serves as Vice Chair of the Mergers and Acquisitions Division of the firm. Rebecca focuses on the representation of start-up and emerging growth companies with a focus on life science companies in the biotechnology, pharmaceutical, medical device, diagnostics and healthcare IT industries. Her practice spans the entire corporate lifecycle, from formation through liquidity. In addition to her company client counsel, Rebecca represents a number of prominent venture capital funds and institutional investors in their financing activities. Rebecca is broadly experienced in M&A and has represented both buy-side and sell-side clients in transactions valued in excess of $25 billion.

She also has extensive experience and regularly advises in all areas of Delaware corporate and alternative entity law. Rebecca was named to Best of the Bar by the Philadelphia Business Journal in 2022 and in 2023 was named a Most Effective Deal Maker by the Legal Intelligencer. Also in 2023, Rebecca was named to the Delaware Business Times’ 40 under 40, an annual list that recognizes the best young professionals under the age of 40 in the State of Delaware. In addition, Rebecca has been featured in Latinos Leaders Magazine. Rebecca is a graduate of the University of California, Berkeley, School of Law, where she won the Prosser Prize in Negotiations, and a graduate, with highest honors, of Lehigh University, where she was elected to Phi Beta Kappa. Before law school, Rebecca was a Fulbright Scholar in Jakarta, Indonesia.

I. The role of operating agreements in setting member rights and obligations | 1:00pm – 1:15pm

• Allocating decision-making authority
• Defining voting rights and thresholds
• Balancing majority vs. minority member rights

II. The court’s interpretation of vague vs. specific language in LLC agreements | 1:15pm – 1:30pm

III. Importance of clear and detailed provisions regarding financial reporting | 1:30pm – 1:45pm

• Frequency and format of financial disclosures
• Specifying accounting standards and methods

IV. Common pitfalls in vague language and how to avoid them | 1:45pm – 2:00pm

• Case law examples illustrating the impact of ambiguity
• Techniques for drafting unambiguous provisions
• Best practices for avoiding litigation through precise drafting

Break | 2:00pm – 2:10pm

V. How to distinguish between discretionary and mandatory information provisions | 2:10pm – 2:25pm

• When discretion is appropriate and how to define it
• Drafting enforceable mandatory provisions

VI. Information rights – What members can expect | 2:25pm – 2:40pm

• Statutory defaults vs. negotiated terms
• Access to books and records under state LLC laws

VII. Enforceability of information rights provisions | 2:40pm – 2:55pm

VIII. Strategies for handling disputes over information rights

• Mediation and arbitration clauses
• Litigation considerations and best practices

IX. Drafting for flexibility vs. Stability | 2:55pm – 3:10pm

• Balancing adaptability with long-term enforceability
• Provisions for amending the operating agreement